Updated from 4:02 p.m. EST

Stocks finished flat in an up-and-down session Wednesday after traders digested more weaker-than-expected economic data in the run-up to Friday's employment report.

The Dow finished up 1.63 points to 10,593.11; the S&P 500 closed up 1.93 points, or 0.2%, to 1,151.03; and the Nasdaq was off 6.29 points, or 0.3%, to 2,033.36, after losing about 1% in early trading.

Volume on the New York Stock Exchange reached 1.3 billion shares, while some 1.8 billion shares changed hands on the Nasdaq. On both exchanges, advancers fell just short of even with decliners.

Economic activity in the service sector was slower than anticipated in February, according to the Institute of Supply Management. The ISM Services Index dropped to 60.8, compared with January's reading of 65.7. Economists were forecasting a reading of 63.4. P/> The Fed's Beige Book survey of economic conditions found modest gains in both employment and retail prices during February. Overall, the economy experienced moderate growth.

"We're basically in a holding pattern now until those employment numbers come out on Friday," said Peter Cardillo, chief market analyst at S.W. Bach & Co. "It's a traders market, and there's money out there. So, there's a willingness to go into stocks."

Arthur Hogan, chief market analyst at Jefferies, said traders are prepared for any signs of employment gains in the economy or a Fed interest rate hike.

"It's anybody's guess as to when the Fed will pull the trigger, but some of the pieces of the puzzle they've been looking for are starting to come together," Hogan said. "The two drivers to get the Fed to move are signs of inflation and jobs growth. If we get both of those in the same week, people are going to start to be concerned that the Fed is going to raise interest rates."

Hogan also said that the consensus forecast for nonfarm payrolls in Friday's employment report is too low. While Wall Street expects that payrolls will grow by 125,000, he believes the economy will add over 200,000 new jobs.

Overseas, the FTSE in London lost 0.3% to 4525, and Germany's Xetra DAX shed 0.7% to 4071. In Asia, Japan's Nikkei closed flat at 11,352, while Hong Kong's Hang Seng was down 2% at 13,454.

In currency trading, the dollar was higher against the European common currency. The euro was recently buying $1.2201 in New York, compared with $1.2222 Tuesday. The dollar was buying 110.04 yen. The 10-year Treasury note was trading down 3/32 to yield 4.06%, while crude oil and gold prices were also lower.

Costco Wholesale ( COST) beat analysts' expectations by a penny a share in the second quarter. Net income rose to $226.8 million, or 48 cents a share, vs. $182.1 million, or 39 cents a share, a year earlier. Costco shares closed down $1.40 to $38.31.

AutoZone ( AZO) earned $1.04 a share in the second quarter, beating estimates, but it said same-store sales were flat. Its shares closed down $4.81 to $83.59.

Toys R Us ( TOY) posted a net profit of $144 million, or 67 cents per share, compared with $278 million, or $1.30 per share, a year earlier. The company took a large charge to close its Kids R Us unit. Analysts had forecast earnings of $1.05 a share. Toys R Us shares ended the session down 10 cents to $26.66.

Wal-Mart (WMT:NYSE) said after Tuesday's close that it raised its annual dividend by 44% to 52 cents a share from 36 cents in the previous fiscal year. The retail giant's shares closed up 84 cents to $60.39.

Disney ( DIS) said that 43% of votes cast in its annual director election in Philadelphia withheld support for embattled chairman and CEO Michael Eisner. Former directors Stanley Gold and Roy Disney, battling to force Eisner's removal, predicted earlier Wednesday that more than 40% of Disney shareholders voting in the proxy would oppose the chief's retention. Disney's shares closed down 10 cents to $26.66.

On Thursday, the onslaught of employment data begins at 8:30 a.m. EST with the release of weekly unemployment claims and final worker productivity data for the fourth quarter of 2003. Wall Street economists expect initial unemployment claims to be 345,000 for the week ended Feb. 28, down from 350,000 in the previous week. Productivity is expected to have increased 2.7% in the fourth quarter of last year, compared to a 9.4% growth rate in the previous quarter.

Then, the Census Bureau is expected to report a 0.6% decrease in factory orders in January, compared to a 1.1% increase in December, at 10:00 a.m. EST.

The government's all-important, monthly employment report, including February's nonfarm payrolls and unemployment rate, is due at 8:30 a.m. EST on Friday.

Meanwhile, earnings reports will be out Thursday from Staples ( SPLS), which is expected to report fourth-quarter earnings per share of 41 cents, compared to last year's 35 cents; Martha Stewart Omnimedia ( MSO), expected to report fourth-quarter earnings 7 cents a share compared to last year's 6 cents; and Pep Boys ( PBY), forecasted to report fourth-quarter earnings of 4 cents a share compared to last year's 3 cents.

After Thursday's close, tech leader Intel ( INTC) will give it's midquarter business update.